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In Part 2 of Erin the Expert's 4-part series on Greenway's Construction Loan Platform, the 4 Components of a Construction Loan are discussed. In case you missed last week's blog you can catch up here. 

What are the 4 Basic Components of a Construction Loan?

There are four basic components of the Greenway Mortgage construction loan program – builder approval, project approval, credit approval, and construction.

1. Builder Approval. Aside from getting you pre-approved for your construction loan, the first and most important step is to approve your builder. You have the freedom to choose your general contractor, but we need to verify that the general contractor is established and reputable. As part of this process, we’ll verify the builder’s license and insurance and make sure they have a recent track record of completing similar projects.

2. Project Approval. The second step is to approve your specific project. This involves reviewing project plans and specs from your architect, cost estimates from the builder, and an appraisal of the home’s value on the property once construction is complete.

3. Credit Approval. During these first two steps, we’ll work on your credit approval, following the same process as securing a traditional mortgage. Depending on the loan size, a down payment of only 10 percent is required. You can finance up to 90 percent of the home, including the purchase price and the cost to construct. A minimum credit score of 720 is required to secure a construction loan.

4. Construction. Once your loan closes, the construction phase begins. You’ll receive an initial draw of up to $50,000 to start the project or reimburse you for materials already purchased. You and your builder will coordinate with the construction manager, who will release funds according to the agreed upon draw schedule as work is completed and inspected.

Choosing an Experienced Lender is Critical

A construction loan is more complex than a standard mortgage, with more moving parts and more specialized expertise required.

Greenway Mortgage has the knowledge, experience, and proven process to guide you through the construction loan process as you build your dream home. To learn more about our construction loan program and find out if you qualify, contact us to discuss your project.

Stay tuned for next week's blog (Part 3) on Construction Loan Program Details & Benefits. You can learn more about the One-Time Construction Loan by clicking here.

Don't forget to download Erin The Expert's Mobile Mortgage App where you'll have instant access to Erin, along with helpful tools. Check it out here.